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About Northwest labor press. (Portland , Ore.) 1987-current | View Entire Issue (Jan. 20, 2006)
...New Medicare plan forbids government purchasing pool (From Page 1) ditional Medicare is allowed to offer. By the end of 2005, about 500 managed care plans had contracted with Medicare, covering about 6 million en- rollees. “People are missing the point of the Medicare Modernization Act by focus- ing on the prescription drug benefit,” Berenson said. “The real thing is it’s an attempt to systematically do in tradi- tional Medicare by making private plans more attractive.” is, you have to know two things: 1) In bargaining for a better deal, size matters. Larger groups of buyers get a better deal than smaller groups of buyers. 2) The authors of the Medicare Modernization Act specifically forbade the government from forming the biggest purchasing pool of all — it for- bade the government from bargaining on behalf of all 41 million Medicare re- cipients. That would have lowered prices, possibly to the Canadian level, and hurt the profit margins of drug com- panies. Instead, seniors will be divided among a great many plans. No state has fewer than 11 plans. Oregonians have 71 plans to choose from. Washingtoni- ans have 73. And the ownership patterns of the new PDPs raise all kinds of questions about financial conflicts of interest. The newly hatched PDPs were formed by drug companies, HMOs, PPOs, phar- maceutical benefit managers, large pri- vate employers and even the AARP, a private non-profit. The only entities ex- pressly forbidden by the law from form- ing PDPs were state and local govern- ments. They might have run the plans too efficiently, drawing customers away from private-sector competitors, and that goes against market ideology. Presumably, the PDPs are negotiat- ing some discount on the drugs they buy, just nowhere near the discount the government could have gotten directly. But again, when the sponsors of the Medicare Modernization Act of 2003 weighed the interests of drug and insur- To get the new drug benefit, seniors who don’t have employer or union drug coverage have two options: join or stay in one of the Medicare subsidized HMOs, or sign up for a stand-alone Medicare-approved Prescription Drug Plan (PDP). Market ideology says that by pool- ing the drug purchasing power of many enrollees, the Medicare Advantage plans or stand-alone PDPs can bargain down the price of drugs and thereby save money for taxpayers or enrollees. To understand how preposterous that (Turn to Page 12) ance companies against the interests of seniors, seniors lost out. Not only did the law ban the U.S. government from trying to get a good deal from drug companies, it also pro- hibited reimportation from Canada, which does bargain a better deal for its citizens. All of the bill’s sponsors — 19 Republicans and one Democrat — were recipients of generous campaign contri- butions from PhRMA. And one of the bill’s sponsors, Louisiana Senator Billy Tauzin, left the following year to be- come president of PhRMA. Medicare projects its new program will account for 28 percent of the total U.S. prescription drug market. Experts differ on whether the new Medicare drug benefit will cause drug prices to go up or down in the short run. Some think discounts negotiated by PDPs will tem- porarily reduce prices while others think drug companies will treat the new benefit like a blank check and raise prices. After drug and insurance companies, there’s a third group the new drug pro- gram will subsidize: employers and unions that were previously providing retiree prescription drug benefits. Critics of the Medicare Moderniza- tion Act argued that the new govern- ment benefit would cause employers to drop coverage. Why keep paying for a retiree drug benefit when the govern- ment offers other options? To prevent that from happening, Medicare set up a subsidy program. Employers and unions that contribute an amount equivalent to Medicare’s contribution to drug plans will be par- tially reimbursed. The formula is com- plex, but basically rebates 28 percent of each qualifying retiree’s allowable pre- scription drug costs. The subsidy is pro- jected to amount to $56 per retiree per BENNETT HARTMAN MORRIS & KAPLAN, LLP Attorneys at Law • Personal Injury • Labor •Workers’ Compensation • Employment • Domestic Relations 111 SW Fifth Avenue, Suite 1650, Portland, Oregon 97204 503 227-4600 Representing Unions and Workers Since 1960 (Our legal staff are proud members of UFCW Local 555) PAGE 8 NORTHWEST LABOR PRESS JANUARY 20, 2006
